IRS ruling strikes fear in medical marijuana industry

John Brecher / msnbc.com

Steve DeAngelo of Harborside Health Center

In a potentially crushing blow to the burgeoning medical marijuana industry, the IRS has ruled that dispensaries cannot deduct standard business expenses such as payroll, security or rent.

Harborside Health Center, one of the nation’s largest medical marijuana dispensaries and considered a model for the industry, is on the hook for $2.5 million in taxes from 2007 and 2008.  That is $2 million more than the Oakland, Calif.-based company paid for those tax years.

“I see only two outcomes here,” said Steve DeAngelo, director and chief executive

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